RIM CEO sees new BlackBerry powering growth

WATERLOO, Ontario (Reuters) – A new line of BlackBerry 10 devices will provide Research In Motion with a framework for growth over the next decade, offering long-term value for unhappy shareholders, Chief Executive Thorsten Heins said on Wednesday.

In an interview with Reuters, Heins said RIM had identified $ 800 million of the $ 1 billion of savings it promised for the financial year ending in early March, and was confident of finding the rest as it gets ready to launch the new phones.

RIM is betting that the new smartphones will help it claw back the market share it has lost to the likes of Apple Inc’s iPhone and devices powered by Google’s Android operating system.

Both consumers and corporate customers have abandoned the BlackBerry in droves, even though the devices offer security features that rivals have been unable to match.

“There’s this high-level security that you cannot walk away from, and then there’s ‘good enough’ security,” Heins said in an interview at RIM’s Waterloo, Ontario, campus, a sprawl of low-rise buildings.

But analysts remain skeptical, especially after the botched 2011 launch of RIM’s PlayBook tablet computer, which the company had hoped would compete with Apple’s wildly popular iPad. The PlayBook had top-of-the-line hardware, but its software was far from complete at the launch and needed multiple updates.

RIM delayed the roll-out of the BlackBerry 10 phones to the first quarter of 2013 so as not to repeat the errors that surrounded the PlayBook launch.

Heins said the delay was the correct decision – the way to ensure the BB10 phones are a high-quality product rather than a rushed one that would not meet customer expectations.

“I think it’s all lining up. Sometimes you get the feeling that the universe is in disarray, and with BlackBerry 10 coming, I see the stars lining up,” Heins said.

SLEEK DEMO MODELS

Sleek demo models of the new phones look much like the high-end smartphones in the market today, and company executives proudly showed off a touch-screen version and a version with the miniature QWERTY keyboard popular with many BlackBerry users.

Users flick a thumb or finger to maneuver from one program to another and can sneak a look at an incoming email while browsing the Internet or using other applications, a multi-tasking ability that RIM says rival devices lack.

Personal and business profiles can be kept separately, something RIM calls BlackBerry Balance. Corporations can erase only their share of the data on a device if they need to do so for security reasons, leaving personal photos, contacts and emails untouched.

The app library available at launch will not match the vast number available on other devices. Heins said RIM had chosen to focus on providing those apps needed in different regional markets. It expects some 100,000 apps to be ready at launch.

The developer community has been broadly enthusiastic about the devices. But financial analysts have mixed views on their likely reception in an ultra-competitive market.

Pacific Crest analyst James Faucette warned last week that BlackBerry 10 is likely to be dead on arrival – with an operating system that gets “a lukewarm response at best,” due to the unfamiliar user interface and a shortage of apps.

SHAREHOLDER VALUE

Heins insisted morale was high at the company, despite 5,000 job cuts and a rapidly sliding market share ahead of the launch of the new phones.

RIM’s share price is down more than 90 percent from a 2008 peak of about $ 148. It has fallen even after Heins, a former Siemens AG executive, took over in January. The shares on Wednesday closed at $ 8.49 on Nasdaq.

“The message to our shareholders is that we understand this is and has been a difficult time for them and for us,” the tall, bespectacled CEO said. “But with the development of the BlackBerry 10 platform we are truly convinced that we will create long-term value for RIM’s shareholders and investors.”

RIM has already given the demo phones to developers and to carriers, and its new BlackBerry Enterprise Server 10, which runs the devices on corporate networks, is in beta testing with 20 key customers — both government agencies and corporates.

Next month, the company will give more than 50 top enterprise customers technical previews of both BES 10 and the devices.

Heins said the feedback he is getting from the customer base “is very encouraging.”

With the erosion of RIM’s base particularly strong in North America, there has been speculation the company could choose to launch the new phones in a region where the phones remain popular. Heins said that would not be the case.

“We cannot launch every carrier and every country on the same day, but what we have defined is a set of waves in the various regions,” he said. “It is going to be a global launch. There isn’t one preferred region. We are managing and planning it as we speak.”

(Reporting by Euan Rocha and Janet Guttsman; Editing by Frank McGurty and Leslie Adler)

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Accused Colorado gunman tried to harm himself: reports

CENTENNIAL, Colo. (Reuters) – Accused Colorado theater gunman James Holmes was taken to the hospital on Tuesday for a medical condition that left him unable to attend a court hearing set for two days later, his lawyers said, with local media reporting he had tried to harm himself.

The lawyers, explaining in vague terms in an emergency hearing on Wednesday the sudden developments that sent him to the hospital, requested a delay in a routine pre-trial hearing due on Thursday. There was no word on Holmes’ current condition.

“What occurred was midday yesterday. We were informed of a situation that involved a trip to a hospital,” Holmes’ attorney Tamara Brady said in court, giving scant further details but adding, “It’s not as simple as a migraine.”

Holmes, a 24-year-old former neuroscience graduate student, is accused of opening fire inside a suburban Denver movie theater during a midnight screening of the movie “The Dark Knight Rises” in July, killing 12 people and wounding 58 others.

The rampage was one of the bloodiest acts of gun violence in the United States in recent years.

Law enforcement sources told local television station CBS4 that Holmes made multiple “half-hearted” suicide attempts over the past few days, including one in which he ran into a wall in his jail cell and another in which he jumped off his bed.

Another local television station, ABC7, reported that Holmes was hospitalized after intentionally pounding his head on the walls and floor of his cell.

The station quoted sources familiar with the case as saying his actions were an indication of Holmes’ mental state, but did not constitute suicide attempts.

A judge approved the emergency defense request for a delay in the case, and set a new hearing for December 10. Holmes’ lawyers, in filing their request, did not provide details of Holmes condition, citing legal, medical and psychological privilege.

INSANITY DEFENSE?

“As a result of developments over the past 24 hours, Mr. Holmes is in a condition that renders him unable to be present in court for tomorrow’s hearing,” Holmes’ lawyers wrote in the delay motion.

Another of Holmes’ attorneys, public defender Daniel King, did not respond to reporters who asked if Holmes was still in the hospital.

Prosecutors had earlier objected to a delay, saying it should be denied unless more detailed information was provided on Holmes’ condition than was contained in the defense request.

“It is not clear whether it is claimed he is suffering from a physical medical condition, a mental condition, whether he is suffering from a negative emotional reaction to his circumstances, or anything other than he has some kind of ‘condition,’” prosecutors wrote in their response.

Prosecutors have depicted Holmes as a young man whose once promising academic career was in tatters at the time of the shooting. He failed oral board exams for graduate school in June and a professor suggested he may not have been a good fit for his competitive doctorate program.

Holmes then began a voluntary withdrawal from the school and amassed an arsenal of weapons as part of “a detailed and complex” plan to commit mass murder, prosecutors charge.

Holmes has yet to enter a plea in the case, and prosecutors have not indicated whether they will seek the death penalty.

Holmes’ lawyers, who analysts have suggested may be laying the groundwork for an insanity defense, have said Holmes suffers from mental illness and sought to get help before the shooting.

Arapahoe County Sheriff Grayson Robinson, asked about Holmes’ condition, told Reuters he could not release any information, citing privacy issues and jail security.

(Writing and additional reporting by Mary Slosson; Editing by Cynthia Johnston, Jim Loney and Peter Cooney)

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French CEOs: ‘Help!’

When some German politicians called on French President François Hollande recently to step up the pace of economic reform in France, Finance Minister Wolfgang Schäuble sprang to Hollande’s defense in Berlin, saying it was wrong to call Europe’s second-largest economy the “sick man” of the region.

The heads of France’s biggest companies do not agree. Over the past few weeks, an extraordinary cry of alarm has risen from chief executives who warn that the French economy has gone dangerously off track. In an interview to be published on Nov. 15 in the magazine l’Express, Chief Executive Officer Henri de Castries of financial-services group Axa (CS:FP) warns that France is rapidly losing ground, not only against Germany but against nearly all its European neighbors. “There’s a strong risk that in 2013 and 2014, we will fall behind economies such as Spain, Italy, and Britain,” de Castries says.

On Nov. 5, veteran corporate chieftain Louis Gallois released a government-commissioned report calling for “shock treatment” to restore French competitiveness. And on Oct. 28, a group of 98 CEOs published an open letter to Hollande that said public-sector spending, which at 56 percent of gross domestic product is the highest in Europe, “is no longer supportable.” The letter was signed by the CEOs of virtually every major French company. (The few exceptions included utility Electricité de France, which is government controlled.)

The outcry is unusual for France Inc., which has tended to lobby behind the scenes and avoid public criticism of the government. That’s perhaps not surprising, since many CEOs attended the same schools as the country’s top politicians and often worked in government before going into business. De Castries was a classmate of Hollande’s at the elite Ecole Nationale d’Administration; Serge Weinberg, chairman of pharmaceutical giant Sanofi (SAN:FP) and a signatory of the Oct. 28 letter, used to work for Socialist Foreign Minister Laurent Fabius.

The problems they’re complaining about aren’t new. Heavy taxes and social charges required to support high government spending have eroded corporate profitability. In the l’Express interview, de Castries says that on average, the government charges incurred by his company for each employee are more than double the employee’s take-home pay. French labor costs are the second-highest in Europe, after Belgium, as companies are burdened with rigid and devilishly complicated work rules. No surprise, then, that operating margins at French companies have shrunk almost 40 percent over the past decade, while those of companies in Germany—where painful labor-market reforms were carried out—have risen about 40 percent.

With Europe mired in economic crisis, the French citizenry is now reaping the bitter results. Companies are shedding workers, pushing unemployment to a 13-year high of more than 10 percent, almost twice Germany’s rate. After three quarters of flat growth, the economy looks to be tipping into recession.

At the same time, the crisis has pushed other European governments—Italy’s, for example—to carry out long-overdue reforms. As Gallois put it in his report, France has become “unhooked” from the broader economic realities. Gallois listed 22 recommendations, including a €30 billion ($ 38 billion) reduction in payroll taxes, loosening of labor laws, and the lifting of a ban on shale-gas exploration.

Hollande’s government didn’t respond to most of the recommendations but said it would enact temporary tax credits for business totaling €20 billion over three years. Corporate bosses are not impressed. A temporary credit will not “structurally diminish the cost of labor” or reduce administrative burdens on business, Michel Landel, CEO of food-service group Sodexo (SW:FP), said in a Nov. 10 radio interview.

Businesses also fret that the process of applying for tax credits will add to already burdensome paperwork. “The first thing they do is to complicate the mechanism for lowering the social charges,” de Castries laments in the l’Express interview.

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Egypt recalls envoy to Israel after Gaza strike

CAIRO (AP) — Egypt has recalled its ambassador to Israel after an Israeli airstrike killed the military commander of Gaza‘s ruling Hamas.

In a statement read on state TV late Wednesday, spokesman Yasser Ali said that President Mohammed Morsi recalled the ambassador and asked the Arab League‘s Secretary General to convene an emergency ministerial meeting in the wake of the Gaza violence.

Morsi also called for an immediate cease fire between Israel and Hamas, an offshoot of Morsi’s Muslim Brotherhood. Israel says it struck in response to rocket attacks from Gaza.

Hours earlier, Morsi’s Muslim Brotherhood group denounced the Israeli airstrike as a “crime that requires a quick Arab and international response to stem these massacres.”

Relations between Israel and Egypt have deteriorated since longtime President Hosni Mubarak was ousted last year.

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Zynga CFO David Wehner deflects to Facebook

NEW YORK (AP) — Zynga‘s finance chief is leaving the troubled online game company to join Facebook.

San Francisco-based Zynga Inc. said Tuesday that David Wehner will take a “senior finance position” at the social networking company. His exact title will be vice president of corporate finance and business planning, Facebook said.

Chief accounting officer, Mark Vranesh, is replacing Wehner as chief financial officer, returning to the post he held from 2008 to 2010, while Zynga was still a private company.

Zynga also reshuffled its executive ranks, a move CEO Mark Pincus said puts the company in a position for “long-term growth.” Zynga, whose games include “FarmVille” and “Texas HoldEm Poker,” has seen its stock price fall sharply in recent months amid concerns about its ability to make money from mobile games, off of Facebook.

David Ko, who was previously chief mobile officer, is now chief operations officer. Barry Cottle, who came to Zynga from Electronic Arts Inc., is now chief revenue officer. He was previously executive vice president of business and corporate development.

The appointments seek to fill some of the holes left by executives who’ve left Zynga in recent months. John Schappert, Zynga’s chief operating officer, left in August after less than a year and a half on the job. Schappert’s exit was followed by that of Mike Verdu, the company’s chief creative officer. And in September Jeff Karp, the chief marketing and chief revenue officer, left the company.

Zynga is also reaffirming its guidance. The company still expects adjusted earnings of 2 or 3 cents per share. Analysts polled by FactSet expect 3 cents.

Zynga shares closed up 1 cent at $ 2.11 and added 2 cents in after-hours trading.

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She’s got the voice, now Christina Aguilera looks for hits

LOS ANGELES (Reuters) – Christina Aguilera has the vocal chops, the look, the strut and millions of new fans thanks to her stint as a judge on TV singing contest “The Voice.”

But can she still sell records?

The singer, who had global hits with “Genie in a Bottle” and the female empowerment ballad “Beautiful” more than 10 years ago, bids to reclaim her status as one of the world’s biggest pop stars with her new album, “Lotus,” released on Tuesday.

Aguilera, 31, says the title and the mixture of dance-pop, ballads and rock-tinged tracks reflect the hopes and disappointments of recent years that saw her 2010 tour for album “Bionic” canceled, a divorce and the box-office flop of her debut feature film, the musical “Burlesque.”

“Lotus represents the unbreakable flower that stands the test of time. No matter the roughest of weather conditions, it remains strong and continues to thrive. (The album) is a nod to my fans who have been here with me the whole journey, and a nod to myself,” she said.

“It is a record of freedom and embracing that…It is very artistic at times, it is very fun at times, it is very free. I think that’s how music and life should be, away from all the negativity,” the four-time Grammy winner said in an appearance at a Billboard Film and TV Music conference in Los Angeles last month.

Aguilera will perform one of the tracks – “Make the World Move” – with her fellow judge Cee Lo Green live on “The Voice” this week for the show’s more than 10 million viewers.

But music industry experts say Aguilera’s popularity on “The Voice” – where her powerhouse performances leave aspiring pop stars in the dust – may not guarantee huge album sales and won’t give the singer a No. 1 hit.

This week also sees new releases from British boy band One Direction and singer Susan Boyle as well as the new “Twilight” film soundtrack.

NOT A BLOCKBUSTER

“I think ‘Lotus’ will certainly debut in the top 10 on the Billboard 200 album chart. But we don’t see it as being a blockbuster out of the gate,” said Keith Caulfield, associate director of charts at Billboard.

“It is a long road to rebuilding Christina as a brand and as a musician, after the last album didn’t so very well,” said Caulfield. “But it’s not always about first week sales.”

Much like Jennifer Lopez on “American Idol,” Aguilera has seen her star rocket in her 18 months on “The Voice.” Just a few months before the TV show made its debut in spring 2011, Aguilera was arrested for being drunk in public in West Hollywood, and her 2010 album “Bionic” had sold a disappointing 312,000 copies.

“‘The Voice’ has reinvigorated her entire career. A lot of people think she is the star of ‘The Voice’ – the judge you tune in for,” said Lyndsey Parker, managing editor at Yahoo! Music.

Yet the first single – “Your Body” – from the new album failed to make a big impact when it was released in September. It peaked at No. 34 on the Billboard Hot 100 chart and never really caught fire on radio.

“It came and went, which surprised me because I think it is a very strong song. And pretty much everything I have heard on this album is strong. I think it’s a real return to form,” said Parker.

“There are very few people in pop who can sing like her. I do think there is a renewed appreciation for great singing that can be done live and that isn’t just about flash. And Christina is coming back to prove that. I think some people are looking at her to take back her crown,” Parker added.

“Lotus” includes duets with both Green and Aguilera’s fellow “Voice” judge, country singer Blake Shelton. It also features the piano-driven ballad “Blank Page,” which is reminiscent of her 2002 hit “Beautiful” and rock-tinged tracks like “Army of Me.”

Aguilera says she hopes to inspire a new generation of singers who were not around in 1999 for her first big hit “Genie in a Bottle.”

“It’s so exciting for me to show them what I do as an artist,” she said. “I’ve been through a lot over the past few years, going through ‘Burlesque,’ a divorce…having a few setbacks….Stuff happens! This is the business. It’s not going to be all cute and pretty and tied up in a bow.

“All of that combined is in ‘Lotus.’ It embraces the woman that I’ve become, and embracing myself coming full circle as a pop star,” she said.

(Additional reporting by Piya Sinha-Roy; Editing by Cynthia Osterman)

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Congress, Obama playing with dynamite, CEOs say of “fiscal cliff”

BOSTON (Reuters) – Corporate America is raising the volume of its plea that the U.S. government avert a year-end “fiscal cliff” that could send the nation back into recession, but chief executives aren’t pushing the panic button just yet.

With a heated election season in the rear-view mirror, executives are calling on the White House and congressional leaders to head off a self-imposed deadline that could bring $ 600 billion in spending cuts and higher taxes early in 2013 if they are unable to reach a deal on cutting the federal budget deficit.

The Business Roundtable on Tuesday kicked off a print, radio and online ad campaign on which it plans to spend hundreds of thousands of dollars featuring the chiefs of Honeywell International Inc , Xerox Corp and United Parcel Service Inc calling on lawmakers to resolve the issue.

In an opinion piece published on Tuesday evening on the Wall Street Journal’s website, Goldman Sachs Chief Executive Officer Lloyd Blankfein urged the business community and the Obama administration to compromise and reconcile so as not to derail the fragile recovery.

One of the more dramatic warnings of the consequences of allowing the U.S. economy to go over the fiscal cliff came from Honeywell CEO David Cote.

“If the last debt ceiling discussion was playing with fire, this time they’re playing with nitroglycerin,” Cote said in an interview. “If they go off the cliff, I think it would spark a recession that’s a lot bigger than economists think. Some think it would just be a small fire. I think it could turn into a conflagration.”

The nonpartisan Congressional Budget Office (CBO) estimates that the U.S. economy would contract 0.5 percent in 2013 if the government fails to stop the budget cuts and tax increases – far below the 2 percent growth economists currently forecast.

A failure in Washington to solve the crisis by the year’s end could prompt major companies to curtail investment plans, said Duncan Niederauer, CEO of NYSE Euronext , operator of the New York Stock Exchange.

“We simply won’t be investing in the United States. We will be investing elsewhere where we have more certainty of the outcome,” Niederauer said in an interview.

About a dozen top U.S. CEOs, including General Electric Co’s Jeff Immelt, Aetna Inc’s Mark Bertolini, American Express Co’s Ken Chenault and Dow Chemical Co’s Andrew Liveris are scheduled to meet with President Barack Obama on Wednesday to discuss the issue.

The four are members of “Fix the Debt,” an ad-hoc lobbying organization that this week launched an advertising campaign that advocates long-term debt reduction.

UNCERTAINTY FACTOR

Bank of America Corp CEO Brian Moynihan said on Tuesday that worries about the cliff have companies holding off on spending.

“That uncertainty continues to hold back the recovery,” Moynihan said, speaking at an investor conference in New York.

Sandy Cutler, CEO of manufacturer Eaton Corp , shared his concern.

“Until we solve the fiscal issues (in the United States and Europe), you’re not going to get back to normal GDP growth,” Cutler told investors on Tuesday.

CEOs are not alone in this worry. The CBO report warned that failure to reach a deal could push the U.S. unemployment rate up to 9.1 percent, the highest since July 1991. It is currently 7.9 percent.

Obama and the Republican leadership of the House of Representatives have signaled a more conciliatory tone since last week’s election, when Obama soundly defeated Republican challenger Mitt Romney, whose party retained a majority in the House.

Wilbur Ross, an investor known for taking stakes in distressed companies, is bracing for higher tax rates in 2013.

“We, like many people, have been trying to utilize gains this year. It does seem that the probability is that rates will go up,” Ross said in an interview with Reuters Insider. “We don’t have a “for sale” sign on anything. But we are mindful that there is a benefit to concluding things this year rather than next.

NO SIGNS OF PANIC

Concerns about the cliff have not prompted customers to cancel orders, though they have added to an overall level of uneasiness that has companies wary of making large capital purchases or hiring significant numbers of new workers.

“We haven’t seen the panicking, like, ‘I’m not going to order something because of the fiscal cliff,’” said Steve Shawley, chief financial officer of heating and cooling systems maker Ingersoll Rand Plc . “Customers are being very judicious with their orders.”

Likewise, JPMorgan Chase & Co CEO Jamie Dimon last month told investors he did not expect the negotiations to hurt lending in the fourth quarter.

“The fiscal cliff isn’t going to change us,” Dimon said, referring to JPMorgan’s commercial bank, which loans money to businesses. The bank’s investment banking side could be more vulnerable if the debate makes investors jittery, he allowed.

WEAPONS, MEDICINES IN THE CROSS-HAIRS

The defense and healthcare sectors are the most vulnerable to the fiscal cliff, as they face the threat of sequestration — automatic, across-the-board cuts to their funding.

Makers of weapons systems note that they have long been preparing for declining sales as the United States winds down two long wars in Iraq and Afghanistan. The industry has already shed tens of thousands of jobs and closed facilities.

Lockheed Martin Corp’s new president and chief operating officer, Marillyn Hewson, told analysts on Monday her company had been preparing for tighter defense budgets for years, even before the sequestration deal.

“We aren’t going to see a major change,” said Hewson. “We’ve been very proactive as a leadership team in taking actions in recent years to address our cost structure, to look at how we can make our product more affordable.”

Automatic cuts to the federal budget could reduce federal health spending by $ 21.5 billion in 2013, potentially affecting everything from Medicare to the Food and Drug Administration, according to an analysis by PwC’s Health Research Institute.

Vincent Forlenza, the CEO of Beckton Dickinson & Co , said the labs he supplies have held off on buying new instruments because of the threat of spending cuts.

“If we don’t get to a deal we will have another year of paralysis and putting off research,” Forlenza said. “The impact of uncertainty on the (National Institutes of Health) budget is causing our research customers to put off research.”

(Additional reporting by John McCrank, Nick Zieminski, Caroline Humer, Jed Horowitz, Sharon Begley and Daniel Wilchins in New York, Rick Rothacker in Charlotte, North Carolina, Nichola Groom in Los Angeles, Andrea Shalal-Esa in Washington, Debra Sherman in Chicago and Anna Driver in Houston; Editing by Patricia Kranz and Steve Orlofsky and Carol Bishopric)

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EU workers in austerity protests

13 November 2012 Last updated at 20:19 ET

Workers across the European Union are set to stage a series of protests against rising unemployment and austerity measures.

The Day of Action and Solidarity calls on leaders to address growing social anxiety and abandon austerity measures.

Some 40 groups from 23 countries are involved in Wednesday’s protests.

Strikes are expected in Spain, Greece, Portugal and Italy, with other protests planned in Belgium, Germany, France the UK and some eastern EU states.

Wednesday’s action, which may affect some transport links and services across the continent, has been urged by the European Trade Union Confederation.

“Austerity is a total dead end, and must be abandoned,” said the group in a statement.

Continental protests

Unions in Spain and Portugal started strikes at midnight local time (23:00 GMT), to protest against austerity measures that have combined cuts in salaries, pensions, benefits and social services with hikes in tax rises.

Italy will see a four-hour national strike which transport workers are also expected to join.

In Greece the strike action is the third major walkout in two months as the country tries to reduce its budget deficit in line with international demands.

Continue reading the main story

The government must meet a 5bn-euro debt repayment by Friday and says it needs the bailout cash to avoid going bankrupt.

Greece must back a package of salary and pension cuts, and labour market reforms, and the 2013 budget, to receive the next part of a bailout – a 31.5bn-euro instalment from the International Monetary Fund and European Union that has been on hold for months – and avoid bankruptcy.

The BBC’s Mark Lowen in Athens says that with proposals for a fifth consecutive cut to pensions, an increase in the retirement age and reductions to salaries, benefits and healthcare, the fury among Greece’s population is growing.

In France, the CGT union has called for public sector strikes, but there are questions about how many workers will stay away.

The strikes are not anti-government, correspondents say, but rather a way of showing that workers in France are in solidarity with their fellow-workers elsewhere in Europe.

While some Belgian unions have told the BBC they will not be striking, all have expressed solidarity with the day’s protests, which is expected to see demonstrations outside the Brussels embassies of Germany, Spain, Greece, Cyprus, Portugal and the Republic of Ireland.

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General investigated for emails to Petraeus friend

PERTH, Australia (AP) — In a new twist to the Gen. David Petraeus sex scandal, the Pentagon said Tuesday that the top American commander in Afghanistan, Gen. John Allen, is under investigation for alleged “inappropriate communications” with a woman who is said to have received threatening emails from Paula Broadwell, the woman with whom Petraeus had an extramarital affair.

Defense Secretary Leon Panetta said in a written statement issued to reporters aboard his aircraft, en route from Honolulu to Perth, Australia, that the FBI referred the matter to the Pentagon on Sunday.

Panetta said that he ordered a Pentagon investigation of Allen on Monday.

A senior defense official traveling with Panetta said Allen’s communications were with Jill Kelley, who has been described as an unpaid social liaison at MacDill Air Force Base, Fla., which is headquarters to the U.S. Central Command. She is not a U.S. government employee.

Kelley is said to have received threatening emails from Broadwell, who is Petraeus’ biographer and who had an extramarital affair with Petraeus that reportedly began after he became CIA director in September 2011.

Petraeus resigned as CIA director on Friday.

Allen, a four-star Marine general, succeeded Petraeus as the top American commander in Afghanistan in July 2011.

The senior official, who discussed the matter only on condition of anonymity because it is under investigation, said Panetta believed it was prudent to launch a Pentagon investigation, although the official would not explain the nature of Allen’s problematic communications.

The official said 20,000 to 30,000 pages of emails and other documents from Allen’s communications with Kelley between 2010 and 2012 are under review. He would not say whether they involved sexual matters or whether they are thought to include unauthorized disclosures of classified information. He said he did not know whether Petraeus is mentioned in the emails.

“Gen. Allen disputes that he has engaged in any wrongdoing in this matter,” the official said. He said Allen currently is in Washington.

Panetta said that while the matter is being investigated by the Defense Department Inspector General, Allen will remain in his post as commander of the International Security Assistance Force, based in Kabul. He praised Allen as having been instrumental in making progress in the war.

The FBI’s decision to refer the Allen matter to the Pentagon rather than keep it itself, combined with Panetta’s decision to allow Allen to continue as Afghanistan commander without a suspension, suggested strongly that officials viewed whatever happened as a possible infraction of military rules rather than a violation of federal criminal law.

Allen was Deputy Commander of Central Command, based in Tampa, prior to taking over in Afghanistan. He also is a veteran of the Iraq war.

In the meantime, Panetta said, Allen’s nomination to be the next commander of U.S. European Command and the commander of NATO forces in Europe has been put on hold “until the relevant facts are determined.” He had been expected to take that new post in early 2013, if confirmed by the Senate, as had been widely expected.

Panetta said President Barack Obama was consulted and agreed that Allen’s nomination should be put on hold. Allen was to testify at his confirmation hearing before the Senate Armed Services Committee on Thursday. Panetta said he asked committee leaders to delay that hearing.

NATO officials had no comment about the delay in Allen’s appointment.

“We have seen Secretary Panetta‘s statement,” NATO spokeswoman Carmen Romero said in Brussels. “It is a U.S. investigation.”

Panetta also said he wants the Senate Armed Services Committee to act promptly on Obama’s nomination of Gen. Joseph Dunford to succeed Allen as commander in Afghanistan. That nomination was made several weeks ago. Dunford’s hearing is also scheduled for Thursday.

___

Associated Press writer Slobodan Lekic in Kabul, Afghanistan, contributed to this report.

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Lockheed says cyber attacks up sharply, suppliers targeted

WASHINGTON (Reuters) – The Pentagon‘s No. 1 supplier, Lockheed Martin Corp, on Monday cited dramatic growth in the number and sophistication of international cyber attacks on its networks and said it was contacting suppliers to help them shore up their security.

Chandra McMahon, Lockheed vice president and chief information security officer, said about 20 percent of the threats directed at Lockheed networks were considered “advanced persistent threats,” prolonged and targeted attacks by a nation state or other group trying to steal data or harm operations.

“The number of campaigns has increased dramatically over the last several years,” McMahon told a news conference. “The pace has picked up.”

She said the tactics and techniques were becoming increasingly sophisticated, and attackers were clearly targeting Lockheed suppliers to gain access to information since the company had fortified its own networks.

U.S. officials have stepped up their warnings about cyber attacks on U.S. banks and other institutions in recent months, warning that attackers are developing the ability to strike U.S. power grids and government systems.

Lockheed officials declined to say if any of the attacks they had seen originated in Iran, which has been linked to recent denial-of-service attacks against U.S. financial institutions.

Rohan Amin, Lockheed program director for the Pentagon’s Cyber Crime Center (DC3), said internal analysis showed that the number of campaigns had clearly grown, and multiple campaigns were often linked.

Lockheed recently wrested a $ 450 million contract to run the military cyber center away from long-time holder General Dynamics Corp.

“HUGE PROBLEM”

As the top information technology provider to the U.S. government, Lockheed has long worked to secure data on computer networks run by a range of civilian and military agencies. The company is also trying to expand sales of cybersecurity technology and services to commercial firms, including its suppliers, and foreign governments, Lockheed executives said.

“Suppliers are still a huge problem,” said Charlie Croom, Lockheed’s vice president of cybersecurity solutions, noting the large number of companies that provide products and components for Lockheed, which has annual sales of just under $ 47 billion.

Croom, the former head of the Pentagon’s Defense Information Systems Agency, said cybersecurity was a crucial area for Lockheed, but said it was difficult to pinpoint exactly how much business it generates because network security is part of nearly everything the company sells and does for the government.

He estimated that 5 to 8 percent of Lockheed’s revenues in the information systems sector were related to cybersecurity. Lockheed generated $ 9.4 billion sales in that division in 2011.

McMahon said Lockheed had seen “very successful” attacks against a number of the company’s suppliers, and was focusing heavily on helping those companies improve their security.

She said a well-publicized cyber attack on Lockheed’s networks in May 2011 came after the computer systems of two of its suppliers — RSA, the security division of EMC Corp and another unidentified company — were compromised.

“The adversary was able to get information from RSA and then they were also able to steal information from another supplier of ours, and they were able to put those two pieces of information together and launch an attack on us,” McMahon said.

She said Lockheed had been tracking the adversary for years before that attack, and was able to prevent any loss of data by using its in-house detection and monitoring capabilities.

One of the lessons the company learned was the importance of sharing data with other companies in the defense sector, and suppliers, to avert similar attacks, McMahon said.

“It’s just one example of how the adversary has been very significant and tenacious and has really been targeting the defense industrial base,” she said.

Social media, websites and malware introduced by emails remain major areas of concern, Lockheed executives said.

(Reporting By Andrea Shalal-Esa; Editing by Paul Tait)

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